[Becca/FL]

By LINDA RAWLS

Palm Beach Post Staff Writer

Thursday, January 03, 2008

Palm Beach County's foreclosure rate skyrocketed to one for every 45 households in 2007, figures from the county clerk's office show.

That's nearly three times the foreclosure rate of 2006, when there was one foreclosure filing for every 128 households in Palm Beach County, according to the county clerk's figures.

"The economy is tough," said mortgage broker Jim Sahnger, vice president of Palm Beach Financial Network in Sewall's Point.

For comparison, the most recent U.S. foreclosure rate is one for every 617 households, according to Irvine, Calif.-based RealtyTrac.

In Palm Beach County, the clerk's office recorded 13,962 foreclosure filings in 2007, compared with 4,831 in 2006, an increase of 189 percent.

The high number of foreclosures is attributable to several factors, analysts say, including the disastrous result of adjustable-rate loan resets, the mortgage market meltdown and tightened credit and falling home prices.

The combination left many Palm Beach County borrowers "upside down," meaning that they owed more than their houses were worth, making it impossible to refinance or to avoid foreclosure by selling.

"House prices were greatly inflated by issuing millions of nontraditional, poorly underwritten loans to borrowers who could not really afford them," said Doug Bibby, president of the National Multi-Housing Council in Washington, D.C.

Commenting on the Bush administration's proposals to ease the foreclosure crisis, Bibby notes that they "won't change the fact that house prices clearly remain above their equilibrium level, as shown by the continuing drop in house sales and increase in the inventory of houses for sale."

Indeed, inventory has become the "elephant in the room."

"Nobody talks about it," said analyst Jack McCabe, president of McCabe Consulting and Research in Deerfield Beach. But "there's 55,000 homes for sale in Palm Beach County alone."

The rising tide of foreclosures will, of course, add more homes to that inventory as the market continues to decline.

Nationwide, there are 2.1 million vacant homes for sale, "with 700,000 being excess compared to more normal times," said David Seiders, chief economist for the National Association of Home Builders.

Subprime lenders went belly-up, he said, "and it cascaded down from there."

"Those risky mortgage holders thought it didn't matter because they could make up all that profit on the house," said Jeff Kaufman, senior vice president of Atlanta-based SunTrust Mortgage, which did not make any subprime loans.

Today's buyers, Kaufman said, "are in it for a longer-term investment and obviously for a place to live as their primary residence."

Houses won't sell at any great pace, however, until the ratio of home price to household income falls to at least 3-1, McCabe said.

That's also the rate the federal government sets for homeowners to avoid being "cost-burdened" by their house payments.

The ratio in Palm Beach County is twice that number - 6-1, according to census figures - which shows how unaffordable homes in Palm Beach County have become, McCabe said.

The median price of an existing home in Palm Beach County was $345,700 in November, according to the Florida Association of Realtors, a 7 percent drop from the year before.

Most housing experts expect things to get worse before they get better.

Seiders, the economist, said late last month that 2008 will be "another down year," not an easing of the worst housing slump in 16 years, as the association had predicted previously.

"We really are in a danger zone," Seiders said. "We'll be looking at further erosion in house values in 2008 and hit bottom in 2009."